China and U.S. Clash over Asian Infrastructure Bank

Washington's opposition to the AIIB is rooted in the idea that spending on infrastructure does not alleviate poverty unless governance is improved

By Hilton Root

CAIXIN ONLINE - 04.03.2015

In late March, on a small island in southern China, the liberal world order, the basis of global economic prosperity since the end of World War II, was tested. At the annual Boao Forum for Asia, China was asserting its case to lead a new development bank, the Asian Infrastructure Investment Bank, which will rival the U.S.-led World Bank and Japanese-led Asian Development Bank (ADB). Speaking to the delegates, Xi Jinping explicitly announced China's political motivation "to build a new regional order."
The United States refuses to join and has asked its allies to put policy first and insist that a new bank enunciate its commitment to the explicit principles of good governance before soliciting membership. Nevertheless, the U.S. resolve to maintain institutional cohesion around shared principles is going unheeded. Eyeing potential commercial opportunities, the United Kingdom, France, Germany and Italy are among the many allies that have joined the Chinese initiative.
But is the Chinese concept good development policy?
The advantages of adding infrastructural capacity, more railways, ports, roads, telcos, is irrefutable. Throughout developing Asia access to transportation, water, electricity and other utilities is inequitable and of poor quality. The developing regions of East Asia need more infrastructure, lots of it and more than any current configuration of financial institutions can supply.

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